The amount of interest payable on compulsory purchase of land depends upon the value given to the land and the length of the period from the time of entry until reinstatement, the period during which the claimant is dispossessed. During that time, and possibly thereafter the owner has neither the land nor its value, and he is compensated for non-payment of its value by the award of interest. That is the classic function of such an award.
Lord Wright said: ‘the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation.’
The discretion under the 1934 Act applies regardless whether there is or is not a contractual right to interest which underlies the cause of action. Viscount Simon said: ‘The added amount may be regarded as given to meet the injury suffered through not getting payment of the lump sum promptly, but that does not alter the fact that what is added is interest.’
As to a submission to the effect that an order for interest under section 3 could not be interest within the meaning of the Income Tax Acts because the added sum only came into existence when the judgment was given and from that moment had no accretions under the order awarding it. Viscount Simon said: ‘But I see no reason why, when the judge orders payment of interest from a past date on the amount of the main sum awarded (or on a part of it) this supplemental payment, the size of which grows from day to day by taking a fraction of so much per cent per annum of the amount on which interest is ordered, and by the payment of which further growth is stopped, should not be treated as interest attracting income tax. It is not capital. It is rather the accumulated fruit of a tree which the tree produces regularly until payment.’
Addressing the submission that the payment under section 3 was, however described, in truth damages, Lord Wright said: ‘The appellant’s contention is in any case artificial and is in my opinion erroneous because the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation.’ Later he said: ‘It was said that the sum in question could not be interest at all because interest implies a recurrence of periodical accretions, whereas this sum came to existence uno flatu by the judgment of the court and was fixed once for all. But in truth it represented the total of the periodical accretions of interest during the whole time in which payment of the debt was withheld. The sum awarded was the summation of the total of all the recurring interest items.’
Lord Simonds addressed the same submission: ‘It was further urged on behalf of the appellant that the interest ordered to be paid to him was not ‘interest of money’ for the purpose of tax because it had no existence until it was awarded and did not have the quality of being recurrent or being capable of recurrence. This argument was founded on certain observations of Lord Maugham in Moss Empires Ltd v Inland Revenue Comrs [1937] AC 785, 795, in regard to the meaning of the word ‘annual’. It would be sufficient to say that we are here dealing with words in the Income Tax Act which do not include either ‘annual’ or ‘yearly’, but in any case I do not understand why a sum which is calculated upon the footing that it accrues de die in diem has not the essential quality of recurrence in sufficient measure to bring it within the scope of income tax. It is surely irrelevant that the calculation begins on one day and ends on another. It is more important to bear in mind that it is income.’
Lord Wright, Viscount Simon, Lord Simonds
[1947] AC 390, [1947] 1 All ER 469
Law Reform (Miscellaneous Provisions) Act 1934 3(1)
England and Wales
Cited by:
Cited – Halstead v Council of City of Manchester CA 23-Oct-1997
Land had been compulsorily purchased, and the compensation agreed, but after long delays in payment, not as to the calculation of interest.
Held: Interest would be payable from the date of entry. The limitation period arose only once the . .
Cited – Prudential Assurance Company Ltd v Revenue and Customs SC 25-Jul-2018
PAC sought to recover excess advance corporation tax paid under a UK system contrary to EU law. It was now agreed that some was repayable but now the quantum. Five issues separated the parties.
Issue I: does EU law require the tax credit to be . .
Cited – Revenue and Customs v Joint Administrators of Lehman Brothers International (Europe) SC 13-Mar-2019
The Court was asked whether interest payable under rule 14.23(7) of the Insolvency Rules 2016 is ‘yearly interest’ within the meaning of section 874 of the Income Tax Act 2007. If so, the administrators must deduct income tax before paying interest . .
Lists of cited by and citing cases may be incomplete.
Land, Damages
Updated: 17 January 2022; Ref: scu.187522